Calls soar in Century Aluminum

Bullish option traders are turning big profits in Century Aluminum.

On May 31, Investitute’s market scanners detected the purchase of 13,800 July $16 calls for $0.38 to $0.50 with shares at $13.94. Open interest in the strike was a mere 57 contracts before the trades occurred, showing that they were new positions.

Today those calls sold for $1.81, an average gain of more than 300 percent. The stock rose 27.5 percent in the same period, illustrating the kind of leverage that can be achieved with options.

Long calls lock in the price where the stock can be purchased, gaining with a rally and providing leverage to the underlying shares. The contracts can quickly lose value if the stock stalls or pulls back but also carry less risk than owning the shares themselves.

CENX jumped 4.82 percent to $17.60 today along with larger rival Alcoa and other aluminum producers. China reported today that it produced record amounts of aluminum and steel last month, prompting speculation that President Trump will impose restrictions on imports of the industrial metals.

Century rallied after its last earnings report on April 25 and is scheduled to release its next quarterly results after the close on Aug. 2.